Archives

Archives

Eurozone crisis roars back to savage Spain

Sunday, April 15, 2012

By Paul Martin

‘Today the problem is solved,” declared French President Nicolas Sarkozy just five weeks ago. “How happy I am a solution to the Greek crisis, which has weighed on the economic and financial situation in Europe and the world for months, has been found.”

Just when you hoped it really was “solved”, the eurozone crisis has roared back on to the global agenda.

Like a lingering bad smell, the fundamental contradictions at the heart of monetary union can be blanked out for a while but refuse to go away. The busted banks, the grotesque indebtedness, the inherent contradictions – in recent days they’ve all burst back into view.

The eurozone has deeply entrenched economic, financial and political problems. No amount of tub-thumping – by Sarko, European Central Bank President, Mario Draghi, or anyone else – can change that fundamental truth.

The focus has been on Greece but now it is most definitely on Spain. Will Spanish debt woes spiral out of control and, if so, can they then be contained? That’s the €1 trillion question. But how much is that in pesetas?

Spain is the fourth-largest eurozone economy and the 12th biggest in the world. Spanish GDP last year was almost five times that of Greece. On the surface, Spain’s government finances don’t look bad, with national debt at 68pc of annual GDP – around half that of Italy.